Tax interest and penalties add up lightning fast. If you didn’t file a tax return because you didn’t have the money to pay what was owed, or you filed but simply didn’t pay, you’ve gotten yourself into quite a predicament. And the more you let this situation go, the more likely you are going to pay for it and pay for it big.
Unfiled tax returns are a serious offense in the eyes of the IRS, and can lead to mounting debt as back taxes and fines pile up. The IRS will not stop the collections process until all unfiled tax returns have been filed, and you have paid back all money due. If you continue to fail to file your taxes, the IRS will place a levy on your wages.
The IRS knows you haven’t filed.
If you have unfiled tax returns, the best way to stay out of trouble with the IRS is to immediately file your back taxes. Think that the IRS doesn’t notice your unfiled tax returns? Think again. Even if it’s been years since the unfiled taxes, the IRS can notify you at any time that they know and are ready to aggressively pursue back tax payments.
File for yourself before the IRS can file for you
When you fail to act before the IRS does, they will file a substitute for return (SFR) for you. An SFR is based on the IRS’s best guess of your income, and will have penalties and fines tacked onto your tax bill. There is no chance for deductions on an SFR, so it makes sense to file your back taxes before the IRS has a chance to file an SFR for you.
Unfiled tax returns are a crime
Unfiled tax returns have criminal consequences, as well. If you fail to file, you can be sure that the IRS will eventually criminally prosecute you. Claiming an inability to pay for your tax bill is unacceptable to the IRS; they will assess fines and penalties on top of what you originally owed if you fail to file your tax return.
Were you owed a refund? Not anymore
Were you owed a refund in a year that you had unfiled tax returns? After the three year statute of limitations, the U.S. Treasury retains ownership of your refund, and over-payments cannot be applied to other years. In other words, failing to file taxes will never make your situation better, only worse.
Settle Back Taxes
If you need to settle back taxes with the IRS, you’re not alone. Millions of people owe back taxes, and, like you, many of them live in fear of the repercussions. The first step you can take to settle back taxes is contacting the IRS before they contact you. Many people believe that is impossible to negotiate with the IRS, but there is hope.
Settle your total tax debt for less
If you contact the IRS and file your back taxes, you may be eligible to settle back taxes for a fraction of what you owe under the Offer In Compromise program.
Reduce tax penalties
Penalties on your tax delinquency add up. Proving to the IRS that you cannot pay these penalties can mean a reduction in the total amount due. Keep in mind, however, that interest on such penalties will not be forgiven.
Avoid collections during economic hardship
If you’ve fallen on hard times, you can have the IRS place you on a temporary Currently Not Collectible list. While you’re on the list, the IRS will not contact you for collection purposes. Periodically, you will need to prove your situation and re-qualify for the Currently Not Collectible list.
Pay in installments
Don’t qualify for the Offer In Compromise or Currently Not Collectible programs, but can’t pay your back taxes in full? The IRS can offer a tax payment plan for you, so that you can make monthly payments on your tax bill rather than pay one large lump sum. Sometimes the IRS will even allow the total payments to be less than your total tax obligation.
Pay in full
The IRS determines all of your property and investments available, including your vehicle, home, and retirement accounts, to decide whether they feel you can pay your back taxes in full. You may be required to sell personal property, take out a home equity loan, or borrow from your retirement fund to settle your tax debt.
Owing back taxes to the IRS often ends up in wage garnishment. The IRS will send a notice to your employer letting them know that you owe back taxes, and that your employer must now withhold a certain amount from your paycheck and remit it to the IRS.
How much can the IRS take?
If you’re filing as single and have one exemption, the IRS can take all but $365.38 of your biweekly paycheck. If you’re married, filing jointly, and have a child, bringing your exemptions to three, the IRS can take all but $873.08 from your biweekly paycheck. With a wage garnishment leaving you with barely enough to cover your mortgage payments, it’s clearly important for you to stop wage garnishments before they start.
How can you stop wage garnishments?
An experienced tax firm like Smart Business Tax Solutions can negotiate with the IRS, establishing an installment plan instead of wage garnishment. Under an installment plan, you’ll be expected to make monthly payments of a set amount, usually much less than wage garnishment amounts. It is even possible to settle your tax debt for less than you owe under an installment plan, meaning you’ll be done paying off your debt sooner.
If you’ve fallen on hard economic times and cannot possibly make payments to the IRS at this time, you may be eligible to be placed on the IRS’s Currently Not Collectible list. This means a temporary end to IRS collection efforts, including mailings and phone calls. Periodically, you will be expected to pre-qualify for Currently Not Collectible status.
IRS Tax Liens
Owe back taxes and think the IRS doesn’t realize it? If you continue to ignore the problem, you will eventually end up with the IRS placing a Federal Tax Lien on your property, typically including your home.
A Federal Tax Lien means that the IRS has the right to seize your property if you fail to pay your back taxes. Continue to ignore your tax debt, and you will receive a notice that the IRS is demanding immediate payment, or your property will be seized. Once you receive this notice, you’ll either pay within the specified time, or your property, including your house, can be seized and auctioned off to satisfy your debt.
IRS Tax Lien Help
Having the Federal Tax Lien removed is the only way you can assure that your personal property will not be seized. The simplest way of removing tax liens is by paying in full. Thirty days after payment is received, the lien is removed. If cash is paid, the lien is immediately removed.
Options When You Can’t Pay Back Taxes
Removing tax liens is possible if the IRS did not file in accordance with regulations, if removing tax liens speeds up collections, or if removing tax liens will be in the best interest of both parties.
Removing tax liens is also possible by appealing the lien. The IRS must notify you of the lien within five days of filing a Federal Tax Lien. There are a few reasons to appeal a Federal Tax Lien:
The debt was already paid in full.
The IRS filed a Federal Tax Lien while the taxpayer was undergoing bankruptcy proceedings.
The IRS did not follow procedures when filing the Federal Tax Lien.
The statute of limitations for tax debt collection, which is generally ten years, has expired.
The IRS did not give the taxpayer a chance to dispute the Federal Tax Lien.
IRS Tax Levy
If you owe back taxes to the IRS, you may be in danger of receiving a tax levy on your bank account. Once the IRS places a tax levy on your bank account, the bank will be required to immediately freeze your assets, meaning you will have no access to your account. You have 21 days from the placing of the tax levy to pay your back taxes in full. Fail to do so, and your bank will be obligated to send the money in your account to the IRS.
Stop IRS Bank Levies
A bank account levy is not the only type that the IRS can place. A levy can be placed on any of your property, including your home or vehicle. The levy means that the IRS is seizing the title to the property, and will retain the property should you fail to pay your back taxes in a timely manner.
You will have a ten day notice before a levy is placed. If you can pay your back taxes in full, this ten day period is the time to do so. If you cannot, you can remove a levy by filing for a Stay of Collections. A Stay of Collections will give you up to ninety days to find a solution to your tax debt problem.
What if you cannot afford to pay your back taxes in full?
If you cannot afford to pay your back taxes, it is possible to remove a tax levy and return to good terms with the IRS. Making payments to the IRS in installments can help you catch up with your tax bill, and it is even possible to settle the debt for less than you owe and make payments on the lowered amount. Can’t pay your tax bill at all due to economic hardship? You may be eligible to be placed on the IRS’s Currently Not Collectible list, which temporarily stops any IRS attempt to collect, including the placing of a tax levy.
If you need to remove a tax levy, the first step is to hire a tax firm experienced at working with the IRS. Smart Business Tax Solutions has decades of experience fighting the IRS for their clients. Smart Business Tax Solutions has the knowledge of IRS policy and procedure, and can aggressively pursue a settlement for your tax debt.
IRS Asset Seizure
Once the IRS places a tax levy on your property, you need to pay in full or suffer the consequences of an IRS asset seizure. Asset seizure means that the IRS will retain ownership of your property, be it your vehicle, house, or other personal property, and will sell it at auction. Proceeds from the sale will go towards settling your tax debt.
You do have a thirty day window of opportunity after being sent a notice of a tax levy before the IRS can seize your property. If you cannot pay in full, this thirty day period is the time to find a solution to your tax debt problem before your assets are subject to seizure. There are a few options to satisfy your debt without asset seizure:
Pay your debt in installments
Negotiate a payment plan with the IRS if you are not able to pay your tax debt in full. A monthly payment made until you pay off your tax debt, sometimes for a settlement amount that is less than you originally owed, can help you avoid asset seizure.
Settle your tax debt for less
If you are able to prove to the IRS that paying your back taxes in full is financially impossible for you, it may be possible to negotiate a settlement of your tax debt for less than you owe.
Temporarily suspend collection efforts
The IRS is aware that some taxpayers are experiencing financial difficulty, and cannot possibly pay their tax debt. If you are unemployed or underemployed, you may be eligible to be placed on the IRS’s Currently Not Collectible list. Once placed on this list, the IRS will temporarily stop all attempts to collect your tax debt. It is required that you periodically re-qualify for the list.
Criminal Tax Defense
Have you been notified by the IRS criminal-investigation division that you are under investigation for unfiled taxes, tax fraud, or any other deliberate misrepresentation on your tax return? If so, you will need the help of an experienced tax firm for criminal tax defense.
Some people believe that a notice from the criminal-investigation division is the same as being picked for audit. However, criminal investigation is much more serious than a routine audit, which is simply used as a means to examine your return items in detail. If you are under criminal investigation, it means that the IRS believes that you have deliberately committed a tax crime by either failing to file your taxes, or by including false information on your tax return.
Are you guilty of federal tax crimes?
If the IRS finds that you are guilty of tax crimes, you can serve time in prison. This is why it is important to understand the process and have a tax firm on your side throughout the investigation. The IRS will conduct audits in an attempt to uncover fraudulent information on your tax filings. If you have been chosen for an audit, and you know that you have false information on your tax file, you will need to employ a tax firm for audit representation.
Besides being picked for an audit when you know you have included false information on your tax return, there are some other indications that you are being investigated. If you, your family members, or your co-workers have been visited by IRS criminal-investigation division agents, or even FBI agents, you could be under investigation for tax crimes. Your bank or other financial institutions you use can receive a subpoena for documents related to your taxes and finances.
Criminal tax lawyers: Smart Business Tax Solutions
Instead of talking to agents directly, or trying to dispute the findings any agent may claim, you should employ the services of a tax firm. Smart Business Tax Solutions has experience in criminal tax defense, and can help you through a criminal tax investigati
Have you received an IRS audit notice? While millions of taxpayers are audited every year, the concept that the IRS would like to take a closer look at your taxes can be nerve-wracking.
Even taxpayers that have nothing to worry about because they have filed their taxes in a timely and honest manner may be frightened of an impending IRS audit. Hiring a tax resolution company like Smart Business Tax Solutions for audit representations can help ease the anxiety of an IRS tax audit.
It is important to note that not all audits are done face-to-face; in fact, the majority of IRS audits are correspondence audits, done through the mail. Even if you have not been selected for a face-to-face audit, audit representations by Smart Business Tax Solutions help you assure that you are filling out additional paperwork completely and correctly, an important step to the audit process.
What will the IRS expect during an audit?
You will be notified of what documentation the IRS would like beforehand, so that you may prepare for a face-to-face meeting, or fill out correspondence audit paperwork. The IRS may be examining the entirety of your return, or they may only want clarification for a specific part of the return. For example, if you own a small business and have been continuously reporting a loss, and therefore no tax liability, for the business, the IRS may want further proof of your losses. This could include everything from rent receipts and utility statements, to a detailed record of customer billings.
Most audits end in a change to the return. This could be in favor of the taxpayer, or the IRS; the IRS does not necessarily target taxpayers that may owe them more money. You could walk away from an IRS audit being owed additional tax refund money.
While only about one percent of taxpayers are audited per year, you may find yourself in that minority. Instead of going through the stressful process of an IRS audit alone, seek audit representation from an experienced tax firm.
Innocent Spouse Relief
With innocent spouse relief, you can be relieved of responsibility for paying tax, interest, and penalties if your spouse (or former spouse) improperly files their tax return. Generally, the tax, interest, and penalties that qualify for relief can only be collected from your spouse (or former spouse). However, you are jointly and individually responsible for any tax, interest, and penalties that do not qualify for relief. The IRS can collect these amounts from either you or your spouse (or former spouse). Innocent spouse relief only applies to individual income or self-employment taxes.
You must meet all of the following conditions to qualify for innocent spouse relief.
You filed a joint return which has an understatement of tax due to erroneous items, of your spouse (or former spouse).
You establish that at the time you signed the joint return you did not know, and had no reason to know, that there was an understatement of tax.
Given any of the above, it would be unfair to hold you liable for the understatement of tax.